Enterprise Products Partners L.P. announced that it and certain of its customers have amended agreements that provide Enterprise the ability to use the partnership’s existing pipelines to support its crude oil transportation agreements and to cancel the 450,000 barrels per day Midland-to-ECHO 4 crude oil pipeline project (“M2E4”). Generally, the amendments provide for the reduction of near term volume commitments in exchange for extending the term of the agreements.
The cancellation of M2E4 will reduce aggregate growth capital expenditures for 2020, 2021 and 2022 by approximately $800 million. Based on currently sanctioned projects, we expect growth capital expenditures, net of contributions from joint venture partners, for 2020, 2021 and 2022 to be approximately $2.8 billion, $1.6 billion and $900 million, respectively. These estimates do not include capital investments associated with our proposed deep water offshore crude oil terminal (“SPOT”), which remains subject to governmental approvals. We do not expect to receive the approvals for SPOT in 2020. As a result of the cancellation, Enterprise expects to record an impairment charge of approximately $45 million to its earnings for the third quarter of 2020.
“We are very proud of our commercial team for responding and working with our customers to amend these long-term agreements,” said A. J. “Jim” Teague, co-CEO of Enterprise’s general partner. “This is another example of Enterprise working with customers for a ‘win/win’ solution that allows our customers and Enterprise to better allocate capital during the challenging times of the current economic cycle while retaining long-term, fee-based volumes and revenues for our assets. The capital savings from the cancellation of M2E4 will accelerate Enterprise toward being discretionary free cash flow positive, which would give us the flexibility to reduce debt and return additional capital to our partners, including through buybacks.”